With the advent of powerful immunosuppression drugs, acute allograft rejection is rare now in the clinic and the short-term transplant survival hs been excellent. However, long-term transplant survival is also rare and most allografts are continuously lost to rejection as time progresses. This is a sober reminder that there remain significant barriers to graft acceptance. We recently discovered that Foxp3+ Tregs, a cell type dedicated to immune regulation and also critically involved in transplant tolerance, can be driven to an exhausted phenotype by the costimulatory receptor OX40. Such exhausted Tregs readily lose their regulatory functions, acquire typical exhaustion markers such as PD-1, Tim-3, and KLRG1, and become extremely sensitive to apoptosis. Through transcriptional profiling, we identified a new transcription factor, namely Baft3 that is strongly induced by OX40 in Tregs and closely associated with the development of exhausted Tregs. We provide preliminary data that Baft3 physically binds to the promoter region of Foxp3 and actively suppresses Foxp3 expression. Based on this, we hypothesized that Treg exhaustion is an alternative fate of Foxp3+ Tregs and Treg exhaustion is transcriptionally regulated in which Batf3 plays a central role. Understanding the mechanisms of Batf3 induction by OX40 and how Batf3 drives Tregs to exhaustion is the central focus of this application. We believe that the proposed studies will unravel novel mechanisms of tolerance resistance and may lead to the development of new therapies in the induction of transplant tolerance. In addition, findings from these studies will have broad impacts on other immune-mediated diseases, such as cancer therapies and protective immunity.